1. What is Simple Interest?

Simple interest is a method of calculating the interest charge on a loan or savings based on the original principal amount. It does not compound, meaning interest is not added to the principal for subsequent calculations.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal amount (INR)
• \( r \) — Annual interest rate (percentage)
• \( t \) — Time period (years)

Explanation: The formula calculates the interest earned or paid based on the initial amount, the annual interest rate, and the time period in years.

3. Importance of Interest Calculation

Details: Calculating interest is crucial for financial planning, understanding loan costs, estimating savings growth, and making informed investment decisions.

4. Using the Calculator

Tips: Enter the principal amount in INR, annual interest rate as a percentage, and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus accumulated interest.

Q2: Are savings account interests typically simple or compound?
A: Most savings accounts use compound interest, but this calculator helps understand the basic calculation that forms the foundation of interest calculations.

Q3: Can I use this for monthly interest calculations?
A: Yes, but you'll need to convert the time period to years (e.g., 6 months = 0.5 years).

Q4: Is tax deducted from interest earned?
A: In many countries, interest income is taxable. Consult a tax professional for specific advice regarding your situation.

Q5: Why divide by 100 in the formula?
A: We divide by 100 to convert the percentage interest rate to a decimal (e.g., 5% becomes 0.05 for the calculation).